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Update on Recent Court Rulings In Challenges to SEC Administrative Proceedings

By Jeffrey T. Petersen, Esq.  of Shustak Reynolds & Partners, P.C. posted on Friday, July 17, 2015.

James J. Reynolds

James J. Reynolds


We previously reported here  on the SEC administrative proceeding against New York financier Lynn Tilton and her private equity firm, Patriarch Partners, alleging they defrauded investors by concealing poor performance of fund assets. Tilton and her company brought a federal lawsuit claiming the SEC’s administrative proceeding was unconstitutional.

The district court in New York recently dismissed that lawsuit, concluding that the district court had no jurisdiction to hear the complaint, and that the exclusive method of reviewing the administrative proceeding was to proceed with the SEC, with subsequent review in a federal appellate court. Another district court judge reached the same conclusion that there was no jurisdiction over a similar challenge to SEC administrative proceedings in the case Spring Hill Capital Partners LLC v. SEC.

Tilton’s company has already stated that it will seek immediate appellate review of the court’s decision.

On the other side of the fence is the case of Hill v. SEC in the Georgia district court, the defendants’ lone victory in challenging the propriety of these SEC administrative proceedings thus far. We previously reported on the case here. Last week, the SEC filed its appeal of the Georgia court’s decision enjoining the SEC’s administrative proceeding against Hill on the grounds that such proceeding was unconstitutional.

We will keep you updated on developments in these cases, but so far it appears the decision in Hill is not persuading other courts that the SEC’s exercise of administrative power is improper. It remains to be seen whether there will be a split of opinions in the constitutionality of these administrative proceedings once the appellate courts rule.

Jeffrey T. Petersen, Esq. Shustak Reynolds & Partners, P.C.  Shustak Reynolds & Partners, with offices in California and New York, focuses on financial services law and represents broker dealers, investment advisers, registered representatives and high net worth investors.   Jeff can be reached in San Diego at 619.696.9500. His partner, Dennis A. Stubblefield, who specializes in representing clients in SEC and FINRA enforcement proceedings, can be reached in Irvine at 949.451.6800  Contact our firm today for a confidential analysis of your situation. 


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